Under the Radar

Under the Radar 74: Taxes & Accounting


00:00:00   welcome to under the radar a show about

00:00:02   independent iOS app development I'm

00:00:04   Marco Arment and I'm David Smith under

00:00:07   the radar is never longer than 30

00:00:08   minutes so let's get started so today as

00:00:12   the the specter of April 15th rolls

00:00:15   around we thought it'd be a delightful

00:00:17   topic to dive into some accounting and

00:00:20   tax discussion everyone's favorite

00:00:23   topics everybody's favorite topic I mean

00:00:25   you know and if you don't like it you

00:00:27   can just put this on and it'll help you

00:00:28   fall asleep it'll be a nice sleep aid

00:00:30   for you if also you quickly though it's

00:00:32   only thirty minutes yeah so probably

00:00:37   worth anything we do dive into topics

00:00:39   like this it always seems like it's a

00:00:41   good idea to have a brief disclaimer

00:00:42   that neither Marco or I are accountants

00:00:47   tax lawyers anywhere really any kind of

00:00:51   any any kind of any kind of professional

00:00:53   qualified advice what we're talking

00:00:55   about basically but we have some

00:00:58   experience and I think what I'm gonna

00:01:00   hopefully I think makes sense for us to

00:01:01   emphasize isn't so much to give specific

00:01:03   advice about this is these are the four

00:01:06   things that you should do but there's a

00:01:07   few things that I think universally like

00:01:09   our good advice but jmo more is to say

00:01:11   here's the kind of questions you should

00:01:13   be asking when you're setting up your

00:01:15   business when you're looking at your

00:01:16   business and seeing if it's set up

00:01:17   correctly these are the kinds of

00:01:20   questions to ask and then if you don't

00:01:22   have a good answer for them go and find

00:01:24   help either you know research yourself

00:01:26   get professional advice however that

00:01:28   makes sense for you but these are the

00:01:31   kinds of things you should be thinking

00:01:32   about from the accounting and tax side

00:01:34   of setting up a small independent

00:01:36   software business and my number one

00:01:39   piece of advice then I would wanted to

00:01:40   start with is go all the way back I mean

00:01:43   I've I set up my you know my my first

00:01:45   like LLC you probably all most ten years

00:01:48   ago I think it is and the thing that I

00:01:52   did back then that I was very glad that

00:01:54   I did and the advice I give to anyone

00:01:56   starting out now is that it's very

00:01:58   important that you understand what

00:02:01   you're doing and if you can't if you

00:02:03   can't work out what you should be doing

00:02:05   then you need to pay someone to explain

00:02:06   it to you because it's very easy to kind

00:02:10   of

00:02:11   just make a few guesses or you know read

00:02:14   a few like articles online and then just

00:02:15   kind of go for it you know that's like

00:02:17   you kind of under you but it if you do

00:02:20   that take that approach of just kind of

00:02:22   winging it you can be setting yourself

00:02:25   up down the road for some very big

00:02:27   problems both in legal problems

00:02:29   financial problems like there's lots of

00:02:31   things that can come out of this and

00:02:33   what you don't want to ever do you know

00:02:35   like I just recently got my big stack of

00:02:37   paperwork from my accountant so I use an

00:02:40   ad you know I use a qualified CPA to do

00:02:42   my books because it makes it much easier

00:02:44   you know when when she sends that back

00:02:47   to me I go through it and I know enough

00:02:50   about you know all the various taxes all

00:02:52   the various deductions and exemptions

00:02:53   and credits and things that I can go

00:02:57   through it and I'm yeah it makes sense

00:02:58   to me I can read reread it with some

00:03:01   confidence and that has come from I've

00:03:03   sat down and I've read through IRS

00:03:05   publications and documentation and

00:03:07   things that you know if I was just

00:03:08   trusting someone else to always be

00:03:10   giving me good advice I would be setting

00:03:12   myself up you know for potential

00:03:15   problems down the road because at the

00:03:16   end of the day I need to you know sign

00:03:18   my name on the bottom of this document

00:03:19   and you know send it to the government

00:03:21   entity and I'm affirming that everything

00:03:24   in there is correct that I agree with it

00:03:26   that I'm okay with it because what

00:03:29   you'll find in a lot of things in

00:03:30   accounting and taxes is sort of the

00:03:32   interplay between them is in accountants

00:03:35   use terms like conservative versus

00:03:38   aggressive right so you can't there's a

00:03:40   lot of deductions or games you can play

00:03:42   where you know you get into grey areas

00:03:45   and it's like it does this really count

00:03:47   as a business expense or does it not

00:03:49   well it depends on who you ask

00:03:50   and ultimately you know those are

00:03:52   personal decisions that you have to make

00:03:54   but if you don't understand the law or

00:03:56   you don't understand the policies you

00:03:57   can't be making those choices within an

00:03:59   informed way and your accountant might

00:04:01   be making choices that you would

00:04:04   disagree with that could come back to

00:04:05   bite you and so at the the most

00:04:07   important thing I think with accounting

00:04:08   even though it's out of our comfort zone

00:04:10   even though it's not something that I

00:04:11   think most developers you know have a

00:04:14   lot of expertise or talent in it's

00:04:17   important at least at a basic level

00:04:18   understand what you're doing and if you

00:04:20   do you know if your accountant is coming

00:04:22   to you with some very complicated

00:04:23   sophisticated

00:04:24   and you don't understand it it's

00:04:26   probably in my opinion not a great idea

00:04:29   to pursue something like that it's like

00:04:31   if you can't understand it it's probably

00:04:32   not worth doing and like I said if you

00:04:34   can't understand it if you're having

00:04:35   difficulty wrapping these around you

00:04:37   know pay for someone to explain it to

00:04:38   you you know to talk to your accountant

00:04:40   like I've you know in the ER I don't do

00:04:42   it as much now but in the early days

00:04:43   when I had an accountant I would you

00:04:45   know every every year or every quarter

00:04:47   when we would sit down I asked her all

00:04:48   kinds of questions about things you know

00:04:50   what what is this what are we doing over

00:04:51   here like what is this deduction mean or

00:04:53   oh we know you said if I'd if I do this

00:04:56   kind of thing then I can take this other

00:04:58   benefit or like making sure that I

00:05:00   really understand it and I think that is

00:05:02   in general just good advice that getting

00:05:05   good help you know finding some good

00:05:07   accountant in terms of some of the stuff

00:05:10   you might need a lawyer for you know

00:05:11   setting up different business entities

00:05:13   and I mean that's a whole massive topic

00:05:15   that is so specific to your region to

00:05:18   your state like I live in Virginia

00:05:20   Markel you live in New York like I

00:05:22   imagine even with state to state some of

00:05:24   the laws are different so you go and

00:05:26   find somebody who is local who's

00:05:28   knowledgeable and ideally has some

00:05:30   experience working with very small

00:05:31   businesses yeah and and I would say too

00:05:34   like in in the area of like making sure

00:05:37   you understand it and and you know

00:05:38   getting good advice from a professional

00:05:40   I would say a little goes a long way

00:05:42   like you you don't need to spend a lot

00:05:46   of money taking up a lot of someone

00:05:48   else's time to to get a good enough

00:05:51   understanding of this to continue

00:05:53   operating your business or to start

00:05:54   operating your business like you know

00:05:57   I've also have been running LLC's now

00:05:59   for about two about ten years something

00:06:01   like that and you know it's at first it

00:06:04   was very intimidating well I I didn't

00:06:06   know what I was doing it seemed like

00:06:07   such a big deal to quote start your own

00:06:10   business and that sounded that seem like

00:06:12   an impossible thing that only other

00:06:14   people do that that's not the kind of

00:06:15   thing I do I'm just a person I don't

00:06:17   know how to do that other people do that

00:06:19   I guess and it only took you know a

00:06:22   sitting down with a lawyer for like one

00:06:24   hour who I haven't seen in 10 years and

00:06:27   it's like it was like one meeting with

00:06:30   the lawyer be like how do I do this and

00:06:31   then he he he gave me an accountant that

00:06:35   he worked with and now I go to that

00:06:37   account

00:06:38   a few times a year and I've asked a

00:06:41   couple of questions here and there but

00:06:43   for the most part if you set it up in in

00:06:47   certain ways like like in the US I get

00:06:49   for example if you do like a basic pass

00:06:52   through LLC which is probably what most

00:06:54   developers would do or would be advised

00:06:56   to do rather than you know various

00:06:58   corporation forms it's really easy you

00:07:01   don't have to do that much and it's you

00:07:05   basically get to just go back to doing

00:07:07   your business as long as you follow a

00:07:08   few very simple guidelines and we're

00:07:12   gonna go through what some of those are

00:07:13   again you should definitely talk to

00:07:14   somebody who has the authority to tell

00:07:16   you this not us I think we will simply

00:07:18   serve as pointers for like here's the

00:07:20   types of things you should be thinking

00:07:21   about and the types of things that you

00:07:22   should ask your accountant slash lawyer

00:07:24   about but it really is if you make it so

00:07:29   it is really a lot easier than you might

00:07:31   think if you if you've never set up a

00:07:33   business entity or a bank account or

00:07:35   business accounting before it can be

00:07:38   very easy and you you you probably won't

00:07:42   have to be constantly meeting with

00:07:45   lawyers and accountants and burning all

00:07:46   that money to do that it's probably a

00:07:48   lot simpler than you think and think -

00:07:51   it's probably worth saying

00:07:52   and then we say in a way that we also

00:07:54   talk often on the show about structuring

00:07:57   your products or structuring the we know

00:08:00   the apps or the businesses that you

00:08:02   pursue to minimize the amount of inputs

00:08:06   that you have to put into them and the

00:08:07   amount of maintenance they take and that

00:08:08   type of a topic that if you're a small

00:08:11   developer you don't have resources or

00:08:13   not in terms of time is not something

00:08:15   that you have a lot of it in the same

00:08:17   way I think in this sense that it is

00:08:18   important to structure things

00:08:21   proactively at the beginning to take

00:08:23   less maintenance and when you're talking

00:08:25   to say you go to see it a lawyer to help

00:08:27   you set up your business in the first

00:08:29   place it's like being upfront about that

00:08:31   it is probably something that is worth

00:08:33   being explicit and saying you know what

00:08:35   is it because they're gonna ask you all

00:08:36   kinds of crazy questions about well if

00:08:39   you set it up in this particular way you

00:08:41   know if you're a an S corp taxes to C

00:08:44   corporation or ov you know that you get

00:08:46   this benefit because then you can have

00:08:47   this thing and it's like

00:08:48   well one of the if one of the biggest

00:08:50   things that they're optimizing for is

00:08:52   your time they're going to probably you

00:08:54   know steer you in a different way and

00:08:55   you may potentially be giving up on some

00:08:58   you know some theoretical deduction or

00:09:01   some benefit that you may have

00:09:02   theoretically but in Mike you know in

00:09:04   practice I think you're gonna enjoy your

00:09:06   life a lot more with a business that is

00:09:08   designed to optimize for you know the

00:09:12   lowest maintenance possible and so

00:09:13   having something you know that basically

00:09:15   you know my business entities

00:09:17   maintenance is I think I write a check

00:09:19   to the State Corporation Commission

00:09:21   every 450 dollars once a year and like

00:09:25   that is the extent of the paperwork that

00:09:26   I have to do you know there's no board

00:09:28   meetings I have to run or all this kind

00:09:31   of stuff that you can sometimes have to

00:09:32   get into because I chose the approach

00:09:35   that was minimizing the amount of time

00:09:36   and maintenance going forward and so

00:09:38   when you're getting a set up when you're

00:09:40   getting advice be sure that you're

00:09:41   explicit about that if that's important

00:09:43   to you if you want to just go crazy and

00:09:45   you know optimize for every possible

00:09:47   deduction or benefit that you might get

00:09:49   like great that's you know by all means

00:09:51   go crazy but it may mean that you're

00:09:53   doing all this busy work down the road

00:09:55   that isn't core to your business that

00:09:57   isn't isn't actually the thing that you

00:09:59   want to be doing right I think that I

00:10:01   think those kind of strategies of like

00:10:03   taking every possible deduction and

00:10:05   having a more complicated corporate

00:10:07   structure and you know to get certain

00:10:08   rates lower and everything else I think

00:10:10   that makes more sense the bigger of a

00:10:13   company you are because the overhead of

00:10:15   doing that as you as you're a bigger and

00:10:17   bigger company with more and more people

00:10:18   involved the overhead and doing that

00:10:20   becomes you know a smaller percentage of

00:10:22   your total time output that you have and

00:10:23   also I think it matters more if you're

00:10:26   in a really low margin business we're

00:10:28   saving all let's saving every possible

00:10:31   penny in tax liability and stuff can

00:10:33   have a major impact on whether your

00:10:35   business is profitable or not and how

00:10:37   much the profitable but for individuals

00:10:39   with software developers that's almost

00:10:40   never the case both of those are usually

00:10:41   not true usually it's just you or maybe

00:10:44   you and a partner or two it's usually a

00:10:46   very small group of people and also you

00:10:48   usually have a pretty large profit

00:10:51   margin like either you're making it or

00:10:53   you're not and if you're not you know

00:10:55   the extra like 15% from a tax change

00:10:58   might not help you and if you are making

00:11:00   it

00:11:01   you probably have more room to play with

00:11:03   in the in the profit margin so like

00:11:05   optimizing for your time as you said

00:11:08   David like you know optimizing for have

00:11:10   needing as little from you as possible

00:11:11   keeping this as simple from you as

00:11:13   possible so that you can actually spend

00:11:14   your time improving your products and

00:11:16   making more money is usually the better

00:11:18   trade-off for most small developers yeah

00:11:23   and so I think probably the next place

00:11:25   that it works makes sense to dive into

00:11:27   is a little bit of just some high-level

00:11:28   advice things that I know have been very

00:11:31   helpful for me from an accounting

00:11:32   perspective the first one and this is I

00:11:36   think the most universally accepted like

00:11:38   good advice for starting a business is

00:11:40   that your business needs to have

00:11:42   separate accounts from your personal

00:11:44   account yes like if you do nothing else

00:11:47   like that will almost all the problems

00:11:52   in accounting at least that's like

00:11:54   that's like ninety percent of what you

00:11:56   have to do just have separate accounts

00:11:59   yeah and so I think for most for most

00:12:01   come from for most kind of businesses

00:12:02   like house it means you probably need to

00:12:04   enter you need to need to set up a

00:12:05   checking account and a credit card are

00:12:09   probably the two things that you'll kind

00:12:10   of need to have set up I don't even do

00:12:12   that I just do a debit card like I just

00:12:14   like the account the account comes with

00:12:16   a debit card from the bank I just use

00:12:17   that and charge everything to that

00:12:18   because again it's like trying to keep

00:12:21   things as simple as possible

00:12:22   I don't even want to worry about like a

00:12:24   business credit card that I have to you

00:12:26   know set up some kind of new auto pay

00:12:27   thing it's like no just just use the

00:12:29   debit card like again over time if I was

00:12:32   a big company maybe getting the extra of

00:12:35   1% of benefit from having a credit card

00:12:37   with some kind of reward system might

00:12:39   pay off but at my scale it doesn't make

00:12:41   sense to make things that complicated

00:12:43   perfect yeah that's even that's even

00:12:45   simpler so you just need to create an

00:12:46   account and their main reason why you

00:12:49   want to create that account is because

00:12:51   then your bookkeeping which is like one

00:12:53   of these big I remember when I was

00:12:54   starting out with like this big scary

00:12:55   term for like what does that mean I

00:12:57   might need to need like double entry

00:12:58   accounting and 20 to balance my

00:13:00   checkbook and all these things that I

00:13:01   don't do in my own like personal

00:13:04   finances very much it's like becomes

00:13:06   incredibly straightforward because

00:13:07   essentially all I'm doing each month you

00:13:09   know it's like all of them all of the

00:13:10   income are all of the credits to that

00:13:12   account and all of my expenses are all

00:13:15   from my that account and that is my

00:13:18   books like the statement I get from my

00:13:21   bank each you know each month that is

00:13:24   essentially my books and I take that

00:13:25   data and it goes into QuickBooks Online

00:13:28   is that the service that I use because

00:13:29   that's what my accountant likes but it

00:13:31   will ultimately find its way into

00:13:32   therefore like actually actual

00:13:34   accounting side of things but it makes

00:13:37   everything really straightforward if all

00:13:40   of the money that comes in to the

00:13:41   business is going through that account

00:13:42   and all the money that's coming out you

00:13:44   know all of your business expenses are

00:13:46   coming out of there and if you're not

00:13:48   doing this like you're just asking for

00:13:49   trouble I mean you're asking to be

00:13:50   audited and when you are audited that

00:13:52   all of a sudden everything becomes super

00:13:55   problematic and I'll have a link in the

00:13:57   show notes to there's a great episode of

00:13:59   the free agents podcast which is another

00:14:01   show here on real AFM talking about sort

00:14:03   of starting up new businesses and they

00:14:04   were had an interview with Andrew

00:14:06   Carroll who's a CPA and he this was his

00:14:09   like number one advice was you

00:14:10   absolutely have to have separate

00:14:12   accounts and he says the I remember him

00:14:13   saying that the biggest benefit of it is

00:14:16   it changes the dynamic if you're ever

00:14:18   audited I mean and hopefully you're

00:14:19   never audited but it's like suddenly all

00:14:21   of your if you're running any amount of

00:14:24   business stuff through your personal

00:14:26   accounts suddenly you now you have to

00:14:28   justify every single one of those

00:14:29   expenses that make to prove that they're

00:14:31   not personal

00:14:32   because they're intermixed with all your

00:14:33   personal things whereas if your accounts

00:14:35   are super clean and it's just all these

00:14:37   very basic obvious things then it's sort

00:14:40   of it changes it and in the IRS or the

00:14:42   you know what whoever's auditing you

00:14:43   they're they then sort of in a different

00:14:45   way need to prove that that's a personal

00:14:47   expense like it changes that burden of

00:14:49   proof a little bit in a good way like

00:14:50   it's in a very both makes your life

00:14:52   easier it makes you better in that

00:14:54   regard and so number one thing if you're

00:14:57   starting a business it needs to have its

00:14:59   own business account and it's very

00:15:01   straightforward and lightweight

00:15:02   typically I mean I ever been a long time

00:15:04   since I set up my business account but I

00:15:06   basically you know once I went through

00:15:07   the part of forming the business and you

00:15:09   know got my LLC number and my tax

00:15:11   identification number it was basically

00:15:13   just a question of going into the bank

00:15:15   that I chose which for convenience is

00:15:17   the scene of the same bank that I bank

00:15:18   at personally and I just like created a

00:15:21   free basic business account like it's

00:15:23   just a checking account it doesn't do

00:15:24   any no no something fancy about it and

00:15:27   it was just you know filling in a few

00:15:28   forms

00:15:29   and now I have a checkbook with you know

00:15:31   my business's name on it and I can go

00:15:33   from there I've done this so many times

00:15:35   that now whenever I walk into my bank

00:15:37   branch the account manager is like hey

00:15:38   start a new business I don't know if

00:15:42   that's a good thing but yeah right I

00:15:44   mean like and I would also say to like

00:15:46   you know regarding like your accounts

00:15:48   and personal versus business you know

00:15:50   regarding what we said earlier but

00:15:52   keeping things simple one of the one of

00:15:53   my philosophies I've operated on for the

00:15:56   entire time I've been running business

00:15:58   accounts is I if there's any question

00:16:02   about whether something is business or

00:16:04   personal or whether it's mostly business

00:16:07   because like you know the IRS has all

00:16:08   sorts of guidelines and requirements on

00:16:09   like what qualifies for a business

00:16:12   deduction and if it's something that is

00:16:14   for both business and personal use or if

00:16:17   it's mixed like if you went on a

00:16:20   vacation and you happen to talk business

00:16:22   with one person while you were there

00:16:23   like that's a part business trip or

00:16:25   something but my philosophy is always if

00:16:28   there's any ambiguity about whether

00:16:29   something is business or personal just

00:16:31   charge it personally and don't lead octa

00:16:33   from the business and again this is one

00:16:35   of those areas where I could very easily

00:16:37   take more deductions and keep more money

00:16:41   from from being taxed but that would

00:16:45   then increase my my risk at all the time

00:16:48   and it would also increase the

00:16:49   complexity if I ever got out of it and

00:16:51   so the way I do it now where I don't

00:16:54   deduct every possible thing I could

00:16:56   because it's just complicated and things

00:16:58   like you know a home office deduction I

00:17:00   don't need out that either because the

00:17:01   offices of is mixed-use home office

00:17:03   deductions are historically known to be

00:17:05   massive audit red flags because so many

00:17:08   people cheat them you know cheat their

00:17:09   taxes or don't follow all the rules by

00:17:11   using home office deductions same thing

00:17:13   with like you know vehicle deductions

00:17:15   like you know I'm a software developer I

00:17:16   don't need to drive anywhere so like

00:17:18   there's there's all sorts of like things

00:17:20   that that a lot of people try to do if

00:17:21   they trying to max out every deduction

00:17:22   but did that put you at a higher risk

00:17:24   and I don't want to live my life in fear

00:17:27   of an audit I know because of the way I

00:17:30   do things that if I ever get audited I

00:17:33   have nothing to hide I'm not I'm not

00:17:36   scared of anything I'm not ashamed of

00:17:37   anything I'm not there's nothing that I

00:17:39   hope they don't find or that would even

00:17:41   be vague as to whether it should be

00:17:43   or not as far as I'm concerned it's like

00:17:44   this is this is incredibly clean and

00:17:46   like and you know there are just certain

00:17:49   things that I don't bother things like

00:17:50   you know if I go out if I got if I go

00:17:52   out to lunch with somebody to talk

00:17:53   business I don't like that if I take the

00:17:54   train to the city to get a meeting I

00:17:55   don't do that because it's like I'm

00:17:57   gonna save like four bucks because if

00:17:59   you're looking that and at the risk of

00:18:00   what and and the complexity of what and

00:18:02   so by doing it the way I do it the

00:18:05   business account has so few transactions

00:18:08   really like there's there so few actual

00:18:11   expenses charged to my business it's

00:18:13   basically like you know Linode hosting

00:18:16   bills every month and and occasionally

00:18:18   like you know a domain renewal or an ad

00:18:21   I bought somewhere or something like

00:18:22   that but for the most part I have so few

00:18:26   transactions that everything else

00:18:29   becomes easier and cheaper so accounting

00:18:31   is really simple I don't pay a

00:18:33   bookkeeper I don't have bookkeeping

00:18:35   services I to use QuickBooks Online

00:18:37   which is terrible but it doesn't matter

00:18:40   it's what everyone uses and it's what

00:18:41   the accountants know and all I do is my

00:18:45   counter doesn't even need to log into my

00:18:46   account I just I just export the the

00:18:49   reports of the profit and loss statement

00:18:50   and give it to him when yes to file

00:18:52   taxes I go in a few times a year and go

00:18:56   through all the important transactions

00:18:57   that are automatically imported from my

00:18:59   business bank account and just classify

00:19:01   them just all right this is this is you

00:19:02   know and that's all I have to do so I'm

00:19:05   saving tons of money and time and stress

00:19:08   by keeping things this simple that I

00:19:11   think make up for any possible smaller

00:19:14   deductions that I'm missing by doing

00:19:16   this this way yeah and I think too it's

00:19:19   it's I remember when I was first getting

00:19:20   started there was easy it's easy to kind

00:19:22   of have this feeling of that like a

00:19:23   business deduction is like it's like it

00:19:27   makes the it makes things free or

00:19:29   whatever like I remember I had would

00:19:31   have that purse - oh it's like well it's

00:19:32   a business expense and it's like it's

00:19:34   like well sort of

00:19:35   it's you're you save the whatever like

00:19:39   the more whatever your marginal tax rate

00:19:41   is on those dollars and which is you

00:19:44   know so yeah that best you're maybe like

00:19:46   having a lower to lowering your tax bill

00:19:48   by a third or a third of the value and

00:19:50   so you know it's a relatively like

00:19:54   you're saying with like some small

00:19:55   expenses

00:19:56   the ones that tend to be most

00:19:58   questionable like you're a train ticket

00:20:00   right you you you you buy a $10 train

00:20:03   ticket you're saving three dollars if

00:20:05   that's a business expense say I'm like

00:20:06   fair enough that's three dollars in your

00:20:08   pocket like I'm not saying this that's

00:20:09   not valuable but it is not it's not that

00:20:13   the entire trip became free like you're

00:20:15   still paying for the whole trip and so

00:20:18   having that mindset I think it

00:20:20   definitely makes a lot of sense that I'm

00:20:22   also probably it's fair to say that you

00:20:24   anything that you do any deductions that

00:20:26   you do take you then will need to have

00:20:30   the means to justify them later and have

00:20:33   a record of that you know so for things

00:20:35   like Linode bills like that's easy I

00:20:36   have you know a folder in my email that

00:20:39   it just has all that you know all the

00:20:40   Linode bills I've ever gotten so if I

00:20:42   ever need to justify it it's a lot

00:20:44   easier than you know if you are trying

00:20:46   to keep you know pictures or scans of

00:20:49   every receipt for every little thing

00:20:51   that you ever did and that becomes a

00:20:53   much more complicated thing and you know

00:20:55   like this is very much just a personal

00:20:56   choice if you like that kind of thing

00:20:58   and you want to push every little thing

00:21:00   go for it if you want to do something

00:21:01   simpler like that works works too and

00:21:03   it's just of that balance of your time

00:21:05   versus the money probably

00:21:07   yeah because anytime you take all those

00:21:10   deductions and make the end and

00:21:12   basically add more to your system you

00:21:14   need support and costs around that you

00:21:16   need a way to you know save these

00:21:18   receipts and track them you need

00:21:20   possibly more bookkeeping expense you

00:21:22   need possibly down the road more time if

00:21:24   you ever get audited you know like the

00:21:26   the amount that you're gonna have to pay

00:21:27   somebody to go through all this stuff

00:21:28   you might actually wipe out all the

00:21:30   savings you had in the meantime if these

00:21:31   are all small deductions like it you you

00:21:34   have to account for the costs of even

00:21:37   tracking this stuff and taking the risk

00:21:40   on some of these kind of questionable

00:21:41   ones so for me it's just it's very

00:21:42   simple I just keep everything very

00:21:44   simple I don't you know I pay more in

00:21:46   tax and I need to technically but I

00:21:48   consider that trade-off worth it for

00:21:50   what I've been getting out of it anyway

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00:23:51   of real afm blue apron a better way to

00:23:53   cook so the last area that it seems like

00:23:55   probably why no any up our discussion on

00:23:57   is just little bit about the actual I

00:23:59   actually the tax side of these things

00:24:03   you know they're not so fun part where

00:24:04   you write a check to the government

00:24:06   though in some ways I always do kind of

00:24:08   like when I have to write a big check it

00:24:09   means that I had a good year so it it

00:24:13   has a slight upside to it but the thing

00:24:17   that I was trying to think about in

00:24:18   terms of like basic advice for for taxes

00:24:21   and I think the biggest thing that I've

00:24:23   learned is the

00:24:24   Orton's of planning for taxes ahead of

00:24:27   time that it shouldn't be something that

00:24:29   you get to the end of the year and

00:24:31   suddenly you're trying to work out what

00:24:34   your tax bill is going to be that you

00:24:37   know I check in on my sales about once a

00:24:39   week you know I go through and I might

00:24:41   bake crazy spreadsheets we've talked

00:24:42   about before where I'm looking at my

00:24:43   income and kind of getting a sense and

00:24:45   on about a monthly basis I'm kind of

00:24:48   doing base overall kind of how the

00:24:51   business is going and on a quarterly

00:24:52   basis I do like a proper analysis of it

00:24:55   and that's sort of where I'm going and

00:24:58   while I'm doing that I'm one of the

00:24:59   things that I'm always looking for is

00:25:01   you know how is the business going and

00:25:04   how it is going to affect my tax bill

00:25:06   there's a bunch of reasons for this in

00:25:08   terms of like you know you have things

00:25:10   like estimated taxes that you may have

00:25:11   to you know do to make sure because the

00:25:14   government wants to you doesn't doesn't

00:25:15   want all your money it's just at once

00:25:16   they want it throughout the year so

00:25:18   either you're doing payroll withholding

00:25:19   or estimated taxes but most importantly

00:25:23   I think is this the reality of you know

00:25:25   it's easy in some ways when you're when

00:25:27   you're running a business that you you

00:25:28   have this money in your bank account and

00:25:30   in your personal life typically you know

00:25:33   when you have money in your bank account

00:25:34   that's yours and you can spend it and

00:25:36   it's you know it doesn't it isn't

00:25:38   beholden to someone else

00:25:40   because all your taxes were you know

00:25:42   we're taken out of your paycheck before

00:25:43   it got there when your business like

00:25:45   there is often you know not a

00:25:46   substantial amounts of money in my

00:25:48   business checking account that is

00:25:50   essentially you know earmarked to go off

00:25:52   to the IRS one day and exactly when it

00:25:55   goes that there's you know a whole

00:25:57   discussion about the way in which you do

00:25:59   your you pay your taxes but it was just

00:26:02   the importance of thinking about that

00:26:04   ahead of time yeah that you know when

00:26:05   you it's like hey wow this is awesome

00:26:07   I landed a consulting cut you know

00:26:09   client they're gonna pay me $10,000 it's

00:26:12   at that very moment it's important to

00:26:15   keep in the back of your mind they

00:26:16   didn't pay you $10,000 you know maybe

00:26:18   they paid your $7,000 or they had you

00:26:20   sixty-five hundred dollars or whatever

00:26:22   it is and take that mean take that money

00:26:24   out that you are going to have to pay to

00:26:27   the IRS or whatever your local you know

00:26:29   if you're to listen to this outside the

00:26:30   United States

00:26:31   whatever your local you know tax entity

00:26:33   is because I'm sure somebody's going to

00:26:35   be coming and taking a chunk of that

00:26:37   and if you think about it that way from

00:26:39   the beginning it makes it a lot easier

00:26:41   rather than kind of getting to the end

00:26:43   of the year and being like oh man wow

00:26:45   this is awkward like I have this huge

00:26:47   bill that I wasn't expecting or I wasn't

00:26:50   aware of and now I have to now I have to

00:26:52   deal with it that's just gonna be a

00:26:54   recipe for pain exactly and because yeah

00:26:57   I think the same thing like when when a

00:26:58   big chunk of money comes in like like

00:27:00   every month when the Apple deposit comes

00:27:02   in from a store earnings I just I just

00:27:04   think of that as like okay well about

00:27:05   40% that's not mine like this that

00:27:08   here's all this money I'm temporarily

00:27:09   it's temporarily in my bank account but

00:27:11   this isn't all mine and so one thing I

00:27:13   did I've done for years actually and

00:27:15   I've changed a couple times here and

00:27:17   there but for the most part I've done

00:27:18   this very very successfully is that you

00:27:20   you know in the u.s. you have to pay

00:27:22   estimated quarterly taxes and then or

00:27:24   you and then you get this this big kind

00:27:25   of settlement at the end of the year

00:27:27   every April and everyone's like oh no my

00:27:28   taxes I'm surprised by this but one

00:27:30   thing I I did for a long time with great

00:27:32   success is paying estimated taxes every

00:27:36   month because you can pay more and more

00:27:38   often than then they require you to

00:27:40   there's no downside except that the

00:27:42   money is you know not working for you

00:27:44   earning interest in your account but

00:27:45   interest rates suck these days so you

00:27:47   know you're not losing much so like it

00:27:49   actually make things very simple for me

00:27:50   to basically just estimate you know kind

00:27:52   of a high amount of what I you know like

00:27:54   you know look at looking for tax rate

00:27:55   and you can say all right well you know

00:27:57   I'll give like you know 35 percent of

00:27:59   this or whatever the federal government

00:28:00   and you know way too much of it to New

00:28:02   York State and then and then you know

00:28:05   every time that monthly big deposit from

00:28:07   Apple would come in I do my own taxes

00:28:09   for them alright well you know here's

00:28:10   you know 9 percent whatever in New York

00:28:12   and 35 percent to to the federal

00:28:14   government and then at the end of the

00:28:15   year you know often I would have

00:28:17   overpaid but it was I you know you'd

00:28:20   rather have that error than the error of

00:28:23   oh crap I owe them 50 grand you know or

00:28:24   something crazy like that and you know

00:28:28   again this is one of those areas where

00:28:29   it's not the most tax-efficient way or

00:28:32   money efficient way to operate but it is

00:28:35   really simple and it's not that far off

00:28:38   like you know you're not saving that

00:28:39   much money by not doing things like that

00:28:41   and and it keeps things not only you not

00:28:45   only you know safe firm from the point

00:28:46   of view of like the law and audits and

00:28:48   stuff but it keeps things light

00:28:51   eight for your mind you you know that

00:28:52   you that you're not gonna have a big

00:28:54   surprise down the road you know that

00:28:56   you're covered you know that whatever

00:28:57   money is left over after you've done the

00:28:59   this kind of system you know this is

00:29:00   pretty safely yours and it just makes

00:29:04   things easier to get out of your mind so

00:29:06   you can focus on what you actually want

00:29:08   to do which is definitely not taxes yeah

00:29:11   and I think it it's that the best point

00:29:13   there is the less you can think about

00:29:15   this stuff the better and so having a

00:29:18   system in place that does that is gonna

00:29:20   be best you know in the same way that if

00:29:22   you're coming from a nine-to-five w-2

00:29:24   job or BIR you gonna just get a regular

00:29:26   paycheck every month like all of this

00:29:28   work has been done for you essentially

00:29:29   like this has all been taken care of and

00:29:31   so now that this is your responsibility

00:29:33   it's just it's works out really well in

00:29:35   your favor to just say I'm gonna

00:29:36   simplify this I'm gonna make it easy I'm

00:29:38   gonna make it nice and legal and make

00:29:39   sure I understand everything and if you

00:29:41   do that

00:29:41   you know then this can just be one of

00:29:43   these boxes you've checked and you can

00:29:44   just move on to the actual fun stuff

00:29:46   thanks for listening everybody and we'll

00:29:48   talk to you next week bye